This week we’ll begin with our monthly and weekly forecasts of the currency pairs worth watching. The first part of our forecast is based upon our research of the past 11 years of Forex prices, which show that the following methodologies have all produced profitable results:
- Trading the two currencies that are trending the most strongly over the past 3 months.
- Assuming that trends are usually ready to reverse after 12 months.
- Trading against very strong counter-trend movements by currency pairs made during the previous week.
- Buying currencies with high interest rates and selling currencies with low interest rates.
Let’s take a look at the relevant data of currency price changes and interest rates to date, which we compiled using a trade-weighted index of the major global currencies:
Monthly Forecast December 2015
This month we forecast that the most probable movements are short GBP/USD and EUR/USD and long USD/CHF. The forecast has performed negatively so far, as shown below:
Weekly Forecast 20th December 2015Â
Last week, we forecasted that NZD/JPY, GBP/AUD and EUR/AUD would all move in opposite directions to their moves of the previous week. We were correct regarding all of them, with a total win of 2.80%.
This week, we note that there were no strong counter-trend movements, so we make no weekly forecasts.
This week saw strength in the USD and to a lesser extent the JPY. There is strong weakness in the CAD and also in the GBP.
Volatility was lower than the previous week. Approximately 60% of the major and minor currency pairs changed in value by less than 1%. Volatility is likely to also be even lower this week, as the Christmas and New Year holiday season begins.
You can trade our forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
At the FX Academy, we teach that trades should be entered and exited at or very close to key support and resistance levels. There are certain key support and resistance levels that should be watched on the more popular currency pairs this week, which might result in either reversals or breakouts:
